The European Green Deal: a post-COVID Green Recovery

di AA.VV. - Autori vari - 31 Maggio 2020

from London, United Kingdom

   DOI: 10.48256/TDM2012_00106

The European Green Deal 

In December 2019, the President of the European Commission, Ursula Von Der Leyen, unveiled the overarching plan aimed at reframing the European policy priorities – the European Green Deal. The goal of this growth strategy is to “transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy” (European Commission, 2019). What truly defines its transformative nature, however, is the integration of climate and environmental protection goals at the core of a long-lasting and sustained stimulus to the European economy. Therefore, the looming climate and environmental crises are dealt with by aiming to reach net zero emissions of greenhouse gases in 2050 and by protecting the EU’s natural capital and preventing damages from environmental risks (ibid.).

The European Green Deal aims to achieve climate neutrality by 2050. This calls for a clean energy transition, with the interest of consumers at its core. The Deal introduces a starting contribution of €7.5 billions, aiming at €100 billions in one decade (Morgan, 2020). The fund would support regions and Member States facing the hardest challenges in moving away from fossil fuel extraction – particularly coal – which will require a compensation and the provision of an alternative skillset to re-enter the job market. To achieve the 2030 climate and energy goals of the Deal, the Commission estimates the need for €260 billions of additional annual investment (1.5% of EU’s GDP) from public and private sectors (European Commission, 2019). The main instrument, a Sustainable Europe Investment Plan aims at incentivizing €1 trillion in the following decade, and shifting the focus of the European Investment Bank, fully aligning with climate goals (Gaventa, 2019).

 

Coronavirus impact on green energy

The coronavirus crisis has impacted the main policy areas that are under focus by the Deal. The climate, energy, social and economic policy sectors have all taken a hit by the unprecedented control measures starting from March 2020. This has eventually led to the need to reassess the Deal and to acknowledge the short and long-term impacts of the coronavirus.

 

Energy and Electricity

Controlling the spread of the virus has caused a decrease in both energy use and greenhouse gas (GHG) emissions, accompanied by unemployment risk and economic difficulties (Erbach, 2020). The IEA (2020) expects oil demand in 2020 to contract for the first time since 2009, due to both the COVID-19 crisis and the ongoing oil price wars between Russia and Saudi Arabia (Generoso, 2020). In March 2020, oil prices hit an all-time low last seen in November 2002 (Erbach, 2020). Nevertheless, the agency expects demand to rebound in 2021, while experiencing a weakened global demand growth in the following years (IEA, 2020). Electricity demand and price have also experienced unprecedented downfalls in the EU. Electricity demand in Italy and France, for example, has plummeted by 20% and wholesale EU electricity prices have dropped to around €20 per MWh (Erbach, 2020; Eurelectric, 2020).

 

Carbon Emissions 

CO2 emissions are expected to drop in Europe but, similarly to China, they are expected to rise again once economic activities restart (Erbach, 2020). Hence, short-term benefits to climate change mitigation risk being offset by the return to business-as-usual practices (Trinità dei Monti, 2020). ICIS, based on the early demand decreases in Italy and the reduction in industrial and aviation activities, projects a reduction in EU ETS-covered emissions of almost a quarter (-24.4%) in relation to pre-COVID levels (Erbach, 2020; Ferdinand, 2020). Furthermore, the EU ETS is experiencing a drop in the price of allowances by 40% between February and March 2020 (Erbach, 2020). A sharp decline in emissions was experienced during the previous financial crisis, due to economic contractions and government restrictions (CEPS, 2020). The coronavirus crisis might present a greater effect in mega-tonnes reduced of CO2. However, similarly to the post-crisis period, emissions are expected to rebound (ibid.)

 

Clean Energy 

The impacts of the pandemic on the clean energy sector may require an increasing central role for governmental interventions and stimulus. The expectations of the solar, battery and electric vehicles markets, vital to meeting the climate change goals of the Paris Agreement, are reduced (Erbach, 2020). Bloomberg New Energy Finance (Holder and Murray, 2020) projects a lower global solar demand in 2020 by 16% due to lower forecasts in demand in China. Similarly, forecasts for electric vehicles and batteries presented lower projections in relation to the production block in China (Erbach, 2020). According to the IEA (2020b), it is the governments’ responsibility to provide the necessary economic stimulus while investing in the clean energy sector. Both mature technologies – wind and solar – and infant technologies – such as hydrogen and carbon capture – require governmental support to reduce their costs, promote their development and ensure climate change mitigation (IEA, 2020b).

 

Position of EU Institutions, Member States and NGOs

European Commission President Von der Leyen was very clear in her video statement on 28 April, highlighting that the EU Green Deal will function as the ‘motor for recovery’ from the pandemic (Von der Leyen, 2020). On 13 May, the Commission clarified it will prioritise areas most affected by the ‘pseudo-’ EU-wide lockdown, mobilising private investments in strategic sectors, enhancing measures that turned useful during the crisis, such as economic tools dealing with natural disasters, research and innovation (Von der Leyen, 2020). Von der Leyen stressed that recovery must be based on common priorities, e.g. the European Green Deal, digitalisation and resilience (Ibid.). Similarly, European Commission’s Green Deal chief Frans Timmersmans said that ‘every euro’ spent in the recovery phase will be linked to the green and digital transitions (TEG, 2020), which would use the EU Sustainable Finance toolbox to help governments.

This attitude was mirrored by European Council President Charles Michel, who issued a roadmap to recovery, prioritizing Green transition and the Digital transformation. More remarkably, he urged other EU institutions, including the European Central Bank, to work on a roadmap that would have this aim (European Council, 2020). Accordingly, 17 Member States’ Environment Ministers wrote a letter urging the commission to use the European Green Deal as the skeleton for post-covid-19 recovery (ClimateHome, 2020). The letter specifically refers to the need of maintaining the Emissions Trading Scheme, environment standards and sectoral policies, and make them more effective at reducing emissions, as well as helping businesses to have a successful green transition (Ibid.).

Equally pressing, green NGOs are calling for a more ambitious plan that would see an increase of the green recovery’s budget from 20% to 50% of the overall budget, focusing on electrification, hydrogen, solar and wind, as well as other cost-competitive mature technologies and emerging technologies (EEB, 2020).

 

The Obstacles to a Green Recovery

However, the green transition has encountered several obstacles. At the institutional level, various initiatives included in the European Green Deal are likely to be delayed, and many have already been postponed (Frederic, 2020). These include (i) the forest strategy and the adaptation strategy, aiming to make the EU ‘climate-resilient’, (ii) empowering the consumer for the green transition, key element of the EU’s circular economy package, and (iii) eFuelEU Aviation, aiming to increase the EU’s bio-based aviation fuel production capacity (ibid.). The Council will not play an avant-gardist role either. Indeed, it is unable to cope with several crises at the time, as seen during the migration crisis, the Greek economic crisis, Brexit and the climate crisis inter alia (López Piqueres, 2020). At the Member States’ level, countries follow different beliefs. Some prefer business-as-usual, others follow the mass, and only few seem to be forward-looking, although not courageous enough. 

Indeed, the letter signed by 17 EU environment Ministers seems to focus more on appearances than on a serious commitment. For example, Greece – one of the letter’s signatories – changed its environmental rules, causing numerous criticisms, as Greek oppositions and green NGOs believe it favours oil and gas industries (POLITICO, 2020). Similarly, Germany procrastinated the coal exit plan and the country’s hydrogen strategy. The Chancellor is facing strong opposition, wanting to slow down emissions reductions targets (Stam, 2020). The Netherlands postponed the imposition of a reduction of GHG emissions (Erbach, 2020). More polarized Member States, such as Czech Republic and Poland, want to reverse an EU–€1Trillion plan to reach an economy with net zero GHG emissions by 2050 and the latter wants to abolish the ETS from 2021 (Recharge, 2020). Thus, Members States are unable to juggle with both crises simultaneously (López Piqueres, 2020).

 

A Green Recovery to Save the Economy

However, the EU ought to stick to the European Green Deal and make it its green economic recovery strategy. The coronavirus crisis is affecting the progress in the fight against climate change. To meet EU climate and environmental goals – currently under threat – and ensure a sound economic recovery, the best approach is a ‘green’ one. The University of Oxford’s new study by Hepburn et al. (2020) – which the eminent economists Sir Nicholas Stern and Joseph Stiglitz  contributed to – after assessing the post-2008 recovery policies, finds that green policies deliver higher economic multipliers and shift CO2 emissions towards net zero. 

In comparison to traditional stimulus policies, green projects lead to the creation of more jobs, have higher returns per dollar spent on the short-term and deliver increased cost savings on the long run. For example, renewable energy short-term investments (such as wind and solar) are extremely labour intensive and create twice as many jobs per dollar in comparison to fossil fuels investment (Hepburn et al., 2020). Furthermore, green construction projects aiming at increasing buildings’ energy efficiency through insulation retrofits, lead to higher economic multipliers (Ibid.). Therefore, recovery policies investing in these areas deliver economic and climate goals. Positive by-products of these policies bring wider benefits to society – i.e. reduced air pollution and related diseases, bringing down health costs (ibid.). Accordingly, acting quickly and cohesively makes a difference to the outcomes.

 

3 Pillars for a Green Recovery

The European Green Deal presents the opportunity of integrating the necessary fiscal stimulus with climate and environmental goals. Being locked-in a fossil-fuel-dependent system would be uneconomical and environmentally damaging (Erbach, 2020). The Deal and its policy goals offer a framework through which EU leaders can assess future decisions – the economic recovery, future investments and the creation of jobs need to be filtered through the lenses of the European Green Deal. Considering the political situation expressed in this article, the EU should act according to three pillars. 

The first is the opportunity of overcoming the economic crisis while taking bold and economically beneficial climate action. Accordingly, the budget should target sectors of the future, such as the digital and the environmental ones (Anderson, Tagliapietra and Wolff, 2020). Second, the EU should rethink all systemic and structural approaches that governed Member States – both at the national and EU level – taking into account the failures that led the Union to the current crisis. Third, with the aim of preventing further health hazards, additional funding should target the environment sector, as climate change bares potential for new epidemics and pandemics to take place (WHO, 2020).

Governments and the EU are now required to choose the winners of the economic recovery, and those winners need to be ‘green’ – in the post-covid but mid-climate change world we will need developed renewable energy and clean technology sectors. Increasing the life-span of ‘brown’ and close-to-death activities would result in the failure to take the necessary bold steps in the fight against the existential crisis that is climate change. 

 

Bibliography [A-I]

Bibliography [L-Z]

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Autori dell’articolo*:

Nicola Blasetti, BASc in Politics and International Studies & Global Sustainable Development presso la University of Warwick, studente di MPhil in Environmental Policy presso l’University of Cambridge, Homerton College.

Sam Andrea Williams, Studente in International Relations alla University of Kent. 

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